Happy Sunday, Traders!
I hope you all had an incredible and meaningful holiday and Thanksgiving with your friends and family.
Last week was a shortened, broken-up week, and the mindset and timeframe adjustment in the previous watchlist was the correct approach.
It’s important to remember this adjustment as there will be several shortened weeks next month and into the new year, and it’s essential to adjust your timeframe and expectations during those periods.
During shortened weeks, factors such as hold time, trade plans, volume, liquidity, and risk management must be considered and adjusted accordingly.
Before introducing several fresh ideas for the upcoming week, I want to discuss last week’s action and ideas and share a lesson with you all.
Recapping Last Week’s Action: The Key Takeaway
Both ideas provided last week played out well. However, while the idea in CYTO materialized perfectly, it did present a challenge. In hindsight, it may have worked seamlessly, but in reality, it posed a challenge for me.
In my plan, I mentioned that I was looking to short a push back into a critical zone of resistance once confirmed and target a move back into support. On Monday, we got just that. The stock pushed back near the high from the previous week, failed, and traded back to the low end of the range and the target.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
However, after the first failed test in the morning, the stock made a new high 2-hours later before failing again. After shorting the initial failed move in the morning because the stock could not hold above this level, I covered some risk on the flush back into the mid-range and looked to hold my position for a move into the low end of the range.
However, as the stock made a new high, I closed my position and waited to react to price action. Of course, after making a new high, the stock immediately failed, and I re-entered the short position immediately, with a stop at the high.
The lesson: It’s okay to stop out. You can always get back in. Always respect your trade plan and stop loss. I have a stop for a reason, and as a result, I stick to it. Sometimes, it takes more than one attempt for an idea to work, especially if it is crowded. In this case, the stock needed to push over the high, squeeze-out shorts, and trap longs before the idea could work. It’s okay to get out because you can always get back in.
Now, traders, let’s go over some fresh trade ideas for the week.
Short pops / dead-cat bounce in SHOT
SHOT was undoubtedly the best opportunity for small-cap, active traders last week on both sides. However, now that the stock is firmly on the backside, I am focused on shorting into previous key levels / looking for a dead-cat bounce.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
Ideally, I am looking for the stock to push over resistance from the previous two days at $4 and squeeze out to $4.5 – $5. That would get me excited from a risk-reward standpoint. Similar to my plans from last week, I would be patient in waiting for the move to occur, for early shorts to get squeezed out on the front side of the intraday move, and then look to enter short once I have a level to trade against, i.e., a break of the upward trendline or perhaps a hard failed up move into $4.5 or $5.
I would target a move back to $3 – $3.5 intraday and don’t plan to hold this overnight.
AFRM and LMND are Both on Breakout Watch
I have grouped these two because they present a similar setup on their respective daily charts.
Firstly, LMND has an unusually high short interest, currently at 31.5%, and a modest float of just 49 million shares.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
I like how the stock has coiled and formed a bullish wedge, with its range contracting and volume significantly declining on the daily chart.
The plan here is straightforward. I am looking for an uptick in volume and for the stock to begin basing near $18, the breakout level. If the stock can consolidate/hold near this level on an uptick in volume, I will be on high alert for a long entry.
I plan on getting long near $18 with price action and volume serving as confirmation ( consolidating near/over $18 with above average volume / a break and hold over $18) and risking almost half an ATR, with a stop near $17.5, as I wouldn’t like to see the stock re-enter the range. My target is a potential area of resistance and supply, $20, and I plan on holding this for multiple days but not exceeding three.
AFRM has a similar setup on the chart and high short interest, currently near 20%, with a 224 million float.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
A breakout in AFRM would be confirmed if the stock experienced an uptick in volume and a push over Friday’s high.
Therefore, I want to get long IF the stock can do both and hold over Friday’s high with authority intraday. If that all confirms, I will likely get long between $27 and Friday’s high, with a stop near $26.
I have three targets with AFRM and plan on taking a third off into each target while trailing my stop. First target is $28, then $29, and lastly $30. I will trail my stop by placing it below the previous higher low, using the hourly time frame.
